HP begins selling pay cut plan to European workers

Union up in arms at cost-cutting strategy

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Hewlett-Packard has begun the tricky task of convincing its workers in the UK and Europe to voluntarily take a pay cut.

The vendor announced yesterday that it was pursuing a company wide pay cut as an alternative to redundancies as it negotiates the current economic downturn.

But while US law gives the firm some latitude to unilaterally cut workers' pay, the computer giant’s EMEA employees are required by law to give their individual written consent before any salary deduction can be imposed upon them.

An HP spokeswoman warned today that if enough of the firm’s workforce in Europe didn’t agree to a pay cut of anything between 2.5 and 15 per cent depending on job status, then the PC vendor could face an even tougher time ahead.

“If the majority do it we might get though another few quarters in these troubling times globally,” the spokeswoman told The Register.

When asked if that meant HP wouldn’t have to face the prospect of making further job cuts following last year’s decision to lay-off 24,700 staff worldwide, she responded: “How long is a piece of string? Quite simply we just don’t know on job cuts yet.”

She said that the firm is working closely with the European Works Council and Unite, which is the UK’s largest union, to ensure that employees know their rights regarding the pay cuts announced by boss Mark Hurd on Wednesday.

But despite those reassurances Unite has hit out at HP’s latest strategy to keep its profit ticking over in the face of a global economic downturn.

"UK employees who have made a key contribution to the doubling of the HP services revenue and borne the brunt of redundancies in Europe will be astonished that a company that is increasing revenue and still making substantial profits is seeking a pay cut from its UK workforce,” said Unite’s HP national officer Peter Skyte in a statement yesterday.

He also claimed that senior execs at HP would be able to “make up any reduction in basic pay by increases in their executive bonuses brought about by reductions in everyone else's basic pay.”

As we reported yesterday, HP’s CEO Mark Hurd has taken a 20 per cent cut in his base salary, while other execs will see their pay fall by 10 to 15 per cent.

Hurd said the cutbacks were necessary to rein in costs without making further redundancies at the firm. HP on Wednesday reported first quarter sales of $28.8bn, up 1.2 per cent, and net earnings came in at $1.85bn, down 13.1 per cent compared to the year-ago quarter.

Meanwhile, UK staff received an email from EDS UK & Ireland veep Sean Finnan and HP UK managing director Steve Gill yesterday in which they outlined their plans for the Blighty and Irish workforce.

"In phase 1 we will ask all leaders from HP manager 2 upwards for their consent to contribute through a salary reduction. In EDS this applies to all pay-banded staff," wrote Finnan and Gill.

They said HP and EDS senior vice presidents, vice presidents, directors, fellows and strategists as well as EDS "pay-banded B3" staff will be asked to agree to a 10 per cent pay cut. HP managers and EDS "pay-banded B1 and B2" workers will be asked to take a five per cent hit.

"For leaders in the above categories based in the UK we will be sending an email on 27 March 2009 with full details asking individuals for their consent and support," said Finnan and Gill. "We will provide a three week window for individuals to respond. Changes will take effect from 1 May 2009."

The company will then put phase two into action by reviewing its approach for all remaining employees in UK and Ireland. HP said it will reveal details about the plans to staff next month.

HP currently has a global workforce of around 300,000 people. US staff will see the pay cuts announced earlier this week brought in immediately. ®